A star on the rise

Since 1988, the Middle East has been the world’s largest oil producer, but its refining capability still remains behind Asia Pacific, North America and Europe, with the local refineries only capable of processing around 30% of the crude oil produced in the region. However, the situation is now changing. As global crude oil prices remain unstable, oil-producing companies are forced to seek deeper integration with refining. As a result, in the period from 2010 to 2016, the Middle East was the region with the fastest growing refining capacities.

Following the refining capacity growth, the export of petroleum products from the Middle East also increased: while in 2010 petroleum products export from the region amounted to approximately 150 million tpy, in 2016 it grew to more than 210 million tpy.

Diesel exports saw the greatest increase (from 20 million to 55 million tpy), with naphtha and LPG following closely behind (from 38 million to 50 million tpy; and 40 million to 54 million tpy, respectively). On the other hand, fuel oil exports fell from 28 million to 19 million tpy as a result of the increasing conversion rate of regional refineries and the shrinking fuel oil yield (decreasing from 30% to 25%). Furthermore, there has been an increasing demand within the region for fuel oil to be used as bunker fuel, in relation to the growing maritime industry.

The continued development of the Middle Eastern refining industry is due to a number of reasons, including feedstock availability. According to a forecast by BP, in the period running up to 2040, oil production in the Middle East will keep growing at a rate of 0.6% per year and by the end of this period, it will amount to 37 million bpd (it currently sits at approximately 32 million bpd).

Another critical factor is the region’s strategic location, with access to the main export markets in Europe, Asia Pacific and Africa. While Europe is a mature market with a trend towards shrinking consumption of petroleum products, the Asia Pacific market is far from being saturated: demand here is expected to keep growing, albeit at a slower pace than before. As for Africa, many analysts believe that the region’s demand for petroleum products will keep growing in the long-term and, as a result, petroleum product consumption in Africa will double by 2040 as compared to the current value.

The final driver of the refining industry in the Middle East is, of course, the domestic demand growth. The increase is not expected to be as rapid as in 1990 – 2016, when petroleum product consumption in the region grew at a rate of 3.8% per year, but up until 2040 the rate will still increase 1.1% per year, according to the BP forecast.

Saudi Arabia

Saudi Arabia is the region’s largest oil refiner, which is not surprising given the country’s leading position in the oil production market.

In 2017, the country’s total refining capacities exceeded 2.8 million bpd, which is approximately 30% of the region’s capacities. However, the country is unsatisfied with what has already been achieved and has a number of projects currently being implemented aimed at the refining scope increase and depth, strengthening the integration between refining and petrochemicals. Current projects include Petro Rabigh Refinery & Petrochemical Complex Expansion – Phase 2, modernisation and expansion of SASREF refinery, Saudi Aramco’s Jizan and Ras Tanura refineries, etc.

The announced projects are part of the Vision 2030 economic transformation programme, the main goal of which is the creation of a world-leading downstream sector in Saudi Arabia, built on four key drivers...

Written by Valentin Kotlomin, Euro Petroleum Consultants, Russia. refining sector in the Middle East and North Africa.

This article was originally published in the January 2019 issue of Hydrocarbon Engineering. To read the full version, sign in or register for a free trial subscription.